Persistence Gold Group Ltd — M&A Activity 2007

Mar 7, 2007

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

APAC RESOURCES LIMITED

( *)

(Incorporated in Bermuda with limited liability)

(Stock code: 1104)

VERY SUBSTANTIAL ACQUISITION AND

RESUMPTION OF TRADING OF SHARES

On 16th February, 2007, the Company as the purchaser entered into the Acquisition Agreement with the Vendor and the Guarantor, pursuant to which subject to satisfaction of certain conditions precedent, among other things, the Vendor has agreed to sell and the Company has agreed to purchase the Sale Shares, representing the entire issued share capital of China Mineral, for an aggregate consideration of HK$450,000,000. The Consideration will be satisfied (a) as to HK$300,000,000 by the Company allotting and issuing a total of 500,000,000 Consideration Shares at HK$0.60 per Share credited as fully paid; and (b) as to HK$150,000,000 by the Company paying in cash, to the Vendor on Completion. The value of the Consideration Shares based on the closing price of the Shares on the last trading day prior to the date of signing of the Agreement (i.e. 8th February, 2007) is HK$270,000,000.

The Acquisition constitutes a very substantial acquisition for the Company under the Listing Rules and is therefore subject to the approval of the Shareholders at the SGM. The Acquisition will be subject to the requirements of Chapter 18 of the Listing Rules. As the Vendor and the Guarantor are Independent Third Parties and have no interest in the Shares which is different from the other Shareholders, no Shareholder is required to abstain from voting in respect of the proposed ordinary resolution to approve the Acquisition at the SGM.

A circular containing, among other things, the details of the Acquisition Agreement, the relevant financial information of China Mineral and a notice of the SGM will be despatched to the Shareholders as soon as practicable.

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Completion of the Acquisition Agreement is subject to the satisfaction of the conditions precedent therein. Shareholders and investors should be aware that the Company has not conducted financial, legal and technical due diligence or valuation on Mongolia Co or the Iron Ore Mine nor obtained Mongolia legal opinion thereon or on the licences obtained by Mongolia Co and as the Company is uncertain as to, and not yet in a position to confirm, the legality and validity of the business conducted by Mongolia Co and the licences obtained by it as well as the financial position of China Mineral and Mongolia Co. Therefore, there is a risk that following a financial, legal and technical due diligence on China Mineral, Mongolia Co. and the Iron Ore Mine, the Company may not proceed to Completion on the basis that the result is not satisfactory to the Company in its absolute discretion.

As the Acquisition Agreement may or may not complete, Shareholders and potential investors are advised to exercise caution when dealing in the Shares of the Company.

Trading in the Shares of the Stock Exchange was suspended at the request of the Company with effect from 9:30 am on 21st February, 2007 pending the release of this announcement. The Company has applied for a resumption of trading in its Shares with effect from 9:30 a.m. on 7th March, 2007.

THE ACQUISITION AGREEMENT

Date : 16th February, 2007 Parties: Vendor : Asia Pacific Resources Group Company Limited Purchaser : the Company Guarantor : Mung Kin Keung, as a guarantor of the obligations of the Vendor under the Acquisition Agreement

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of the Vendor, the Guarantor and their respective beneficial owners (where applicable) is an Independent Third Party. China Mineral is an investment holding company wholly-owned by the Vendor with its sole asset being 100% beneficial equity interest in Mongolia Co which has the right to exploit and explore the Iron Ore Mine. However, the Company has not at the date of this announcement obtained Mongolia legal opinion nor conducted a detailed due diligence on those licences. The Vendor group of companies is principally engaged in investments in the natural resources sector. The Vendor is wholly owned by the Guarantor.

Assets to be acquired:

10,000 shares in China Mineral, representing the entire issued share capital of China Mineral

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Consideration:

The aggregate Consideration for the Acquisition is HK$450,000,000, which shall be satisfied: (a) as to HK$300,000,000 by the Company allotting and issuing the Consideration Shares (being 500,000,000 Shares at HK$0.60 per Share credited as fully paid); and (b) as to HK$150,000,000 by the Company paying in cash, to the Vendor on Completion.

The value of the Consideration Shares based on the closing price of HK$0.54 per Share on the last trading day prior to the date of signing of the Acquisition Agreement (i.e. 8th February, 2007) is HK$270,000,000. The price per Consideration Share represents: (a) a premium of approximately 11.11 % to the closing price of HK$0.54 per Share as quoted on the Stock Exchange on 8th February, 2007, being the last trading day before the date of the Acquisition Agreement; and (b) a premium of approximately 18.58 % to the average closing price of HK$0.506 per Share of the 10 business days immediately (including 8th February, 2007) before the date of the Acquisition Agreement. The Vendor will on Completion provide an undertaking to the Company not to, inter alia, transfer, dispose or sell the Consideration Shares for a period of 6 months following Completion. It is contemplated following Completion, with reference to the Vendor’s valuation report a further estimated capital investment of approximately RMB823,000,000 will be required to be injected into Mongolia Co. in order to fully explore and exploit iron ore from the Iron Ore Mine for the next 29 years. The Company will seek third party financing and use internal resources to finance any future capital requirements of Mongolia Co after Completion.

The Directors believe that the issue of the Consideration Shares is fair and reasonable as it is an incentive for the Vendor to accept Shares as an alternative to cash thereby not utilizing the cash of the Group which may be otherwise used for general working capital and/or for the expansion of the Group’s business. The Consideration Shares represent approximately 15.07% and 13.10% of the Existing Capital and Enlarged Capital After Completion respectively. The Consideration Shares credited as fully paid will be allotted and issued under the specific mandate to be sought at the special general meeting of the Company. Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares. The Consideration Shares when allotted and issued shall rank pari passu with all other Shares in issue in the share capital of the Company.

The cash consideration of HK$150,000,000 payable by the Company to the Vendor will be financed by internal resources (derived from the placing of 800,000,000 new shares on 8th February, 2007 which was completed on 28th February, 2007) and/or borrowings of the Group. The ratio of the breakdown of internal resources to borrowings has not been ascertained but will be included in the circular to be despatched to Shareholders.

The consideration has been agreed by the parties after arm’s length negotiations between the Company and the Vendor by reference to (i) the indicative iron ore resources at the Iron Ore Mine together with the current market price of iron ore and (ii) the valuation report conducted by the Vendor as disclosed in the section “Reasons for and benefits of the Acquisition” therein. As such the Company can by reference to these two indicators, ascertain the amount and value of iron ore resources available at the Iron Ore Mine, evaluate whether the Consideration is fair and reasonable.

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China Mineral has no audited or management account as at the date of this announcement as it was only incorporated in August 2005 and therefore has 18 months thereafter to prepare accounts. China Mineral is now preparing its management account. Mongolia Co has not conducted any business since its incorporation save for obtaining of relevant licences and approvals relating to the Iron Ore Mine which the Vendor has paid US$13,800,000 in relation thereto. Based on the audited financial statement of Mongolia Co. for the year ended 31st December, 2005 and 31st December, 2006, the net asset value of Mongolia Co as at 31st December, 2005 was approximately HK$73,885 and the net liabilities of Mongolia Co as at 31st December, 2006 was approximately HK$175,715 respectively. The net loss of the year ended 31st December, 2005 and 31st December, 2006 was approximately HK$6,081 and HK$249,600 respectively.

Immediately following Completion, China Mineral will become a wholly-owned subsidiary of the Company. The financials statements of China Mineral will be consolidated into that of the Company on Completion.

Conditions Precedent:

The Completion is conditional upon fulfilment of the following conditions:

• (a) the passing by the shareholders of the Company of a resolution to approve the Acquisition Agreement, the allotment and issue of the Consideration Shares and the transaction contemplated thereunder at the SGM in accordance with the Listing Rules;

• (b) the Stock Exchange not treating (i) the transactions contemplated under the Acquisition Agreement as a “reverse takeover” under Rule 14.06(6) of the Listing Rules and/or (b) the Company as a new listing applicant under Rule 14.54 of the Listing Rules;

• (c) Mongolia Co having obtained the Exploitation Licence ( ) and Exploration Licence ( ) to exploit and explore iron ore from the Iron Ore Mine;

• (d) the due diligence investigation on China Mineral and Mongolia Co. to be carried out by the Company having been completed to the satisfaction of the Company in its sole discretion including but not limited to the issue of a legal opinion in form and substance satisfactory to the Company by a practising lawyer in Mongolia appointed by the Company confirming, inter alia, the following:-

• (i) the due incorporation, valid and continued existence of Mongolia Co (including payment of its registered capital in accordance with laws of Mongolia and its articles of association, to the extent required);

• (ii) the validity of the Exploitation Licence and Exploration Licence obtained for the Iron Ore Mine and the licenses set out in the Acquisition Agreement;

• (iii) that the Exploitation Licence and the Exploration Licence give Mongolia Co valid, unconditional, unrestricted and irrevocable rights to explore and exploit iron ore at the Iron Ore Mine;

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• (e) all consents of the Stock Exchange and the Securities and Futures Commission (if necessary) and all filings with any relevant governmental or regulatory authorities and other relevant third parties in Hong Kong, Bermuda or elsewhere which are required or appropriate for the entering into and the implementation of the Acquisition Agreement having been given or made; all waiting periods required under the laws of Hong Kong, Bermuda or any other relevant jurisdictions having expired or terminated; and all applicable statutory or other legal obligations having been complied with;

• (f) receipt by the Company to its satisfaction and in its sole discretion of a valuation report on the fair market value of China Mineral’s total equity interest in Mongolia Co issued by an independent professional valuer appointed by the Company;

• (g) receipt by the Company to its satisfaction and in its sole discretion of a technical report issued by the technical adviser appointed by the Company with respect to the Iron Ore Mine as required under Rule 18.09 of the Listing Rules;

• (h) written evidence of the registration of China Mineral as holder of the entire registered capital of Mongolia Co by the relevant governmental authority;

• (i) the warranties set out in the Acquisition Agreement remaining true, accurate and correct in all material respects; and

• (j) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Consideration Shares.

If any of the conditions has not been fulfilled on or before 5:00 p.m. on 31st December, 2007 (or such later date as the Vendor and the Company may agree in writing) and the Company gives notice to terminate the Acquisition Agreement, the Acquisition Agreement shall thereupon terminate, whereupon the parties shall have no further claims against the other under the Acquisition Agreement for costs, damages compensation or otherwise, save for antecedent breaches. The Acquisition Agreement does not provide for the waiver of any of the conditions precedent.

Shareholders and investors should be aware that the Company has not conducted financial, legal and technical due diligence or valuation on Mongolia Co or the Iron Ore Mine nor obtained Mongolia legal opinion thereon or on the licences obtained by Mongolia Co and as the Company is uncertain as to, and not yet in a position to confirm, the legality and validity of the business conducted by Mongolia Co and the licences obtained by it as well as the financial position of China Mineral and Mongolia Co. Therefore, there is a risk that following a financial, legal and technical due diligence on China Mineral, Mongolia Co. and the Iron Ore Mine, the Company may not proceed to Completion on the basis that the result is not satisfactory to the Company in its absolute discretion.

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INFORMATION ON CHINA MINERAL, MONGOLIA CO AND IRON CORE MINE

China Mineral is an investment holding company with its sole asset being 100% beneficial equity interest in Mongolia Co. The Vendor has warranted in the Acquisition Agreement that all the licences scheduled therein are all the licences, approvals, consents and permits required by China Mineral and/or Mongolia Co. to explore and exploit iron ore at the Iron Ore Mine. Mongolia Co was incorporated in Mongolia on 18th July, 2005 with registered capital of US$10,000. It is principally engaged in exploration and exploitation of iron ore in Mongolia. Mongolia Co is a wholly-owned subsidiary of China Mineral with its sole business activity being the right of exploration and exploitation of iron ore from the Iron Ore Mine.

The Directors understand that the Iron Ore Mine is located in the north of Mongolia, which is 90 kilometers north east of Selenga River Site, 120 kilometers of Darhan Railway Station (Latitude 49˚ 38’ 45” to 49˚ 39’ 10” N, Longitude 107˚ 01’00” to 107˚ 05’ 00” E). The Iron Ore Mine is formed in the mountain with altitude of 800 meters to 1,400 meters and covered by a jungle. The Iron Ore Mine was discovered in the year of 1970 with rich iron ore with approximately 308 million tonnes in aggregate. The Directors understand that there has been no change in the status of the Iron Ore Mine since 1970. The Iron Ore Mine is able to be divided into West Site, East Site and Middle Site. So far as the Directors are aware, Mongolia Co is currently conducting further exploration, investigation and geological research on the Iron Ore Mine before mining.

The Company has been informed that the primary exploration of the Iron Ore Mine was completed by Geology Bureau of Ulan Bator, Mongolia led by a team of geological engineers from the previous Union of Soviet Socialist Republic in the year of 1970 which indicated that the total iron ore resources of the Iron Ore Mine was approximately 308 million tonnes in which approximately 142 million tonnes can be mined by open pit. Such information had been extracted from a valuation in 2006 conducted by a professional valuer for the Vendor.

According to the information provided by the Vendor, Mongolia Co. had obtained the Exploration Licence. On 2nd December, 2005, Mine Resources Oil Management Bureau of Mongolia issued the Exploitation Licence, which is valid for a term of 60 years, to Mongolia Co. Under the mining policy adopted by Mines Resources & Oil Management Bureau of Mongolia, the Exploration Licence was superseded by the Exploitation Licence upon the date of issue of the Exploitation Licence. However, Mongolia Co still has the exploration right in the Iron Ore Mine under the Exploitation Licence. The valuation report 2006 was issued to the Vendor by Greater China Appraisal Limited, a professional valuer. So far as the Directors understand from the Vendor, Greater China Appraisal Limited is one of the few valuation firm that provides appraisal services on nature resources valuation. It has seasoned professionals with extensive experience on mine valuations in various part of China.

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INFORMATION ON THE GROUP

The Company is an investment holding company and its subsidiaries are principally engaged in (i) trading of base metals and commodities; and (ii) trading of fabric products and other merchandises. The shareholding structure of the Company before and after the issue of the Consideration Shares is as follows:

Shareholders Profit Harbour Investments Limited Shougang Holding (Hong Kong) Limited Chong Sok Un Existing public Shareholders Vendor	Shareholding as at the date of the Acquisition Agreement No. of Shares Approximate percentage 1,193,399,602 47.39% 600,000,000 23.83% 94,420,000 3.75% 630,180,398 25.03% 2,518,000,000 100.00%	Shareholding as at the date of the Acquisition Agreement No. of Shares Approximate percentage 1,193,399,602 47.39% 600,000,000 23.83% 94,420,000 3.75% 630,180,398 25.03% 2,518,000,000 100.00%	Shareholding as at the date of this announcement No. of Shares Approximate percentage 1,193,399,602 35.97% 600,000,000 18.08% 384,420,000 11.59% 1,140,184,398 34.36% 3,318,004,000 100.00%	Shareholding as at the date of this announcement No. of Shares Approximate percentage 1,193,399,602 35.97% 600,000,000 18.08% 384,420,000 11.59% 1,140,184,398 34.36% 3,318,004,000 100.00%	Shareholding immediately after Completion No. of Shares Approximate percentage 1,193,399,602 31.25% 600,000,000 15.72% 384,420,000 10.07% 1,140,184,398 29.86% 500,000,000 13.10% 3,818,004,000 100.00%	Shareholding immediately after Completion No. of Shares Approximate percentage 1,193,399,602 31.25% 600,000,000 15.72% 384,420,000 10.07% 1,140,184,398 29.86% 500,000,000 13.10% 3,818,004,000 100.00%
		100.00%		100.00%		100.00%

REASONS FOR AND BENEFITS OF THE ACQUISITION

As disclosed in the Company’s circular dated 12 December 2006, the Company continues to seek opportunities to secure long-term iron ore supply for its investment and trading businesses within the natural resources sector. The Directors are of the view that the Acquisition enables the Company to explore and exploit an iron ore mine to produce iron ore directly, which will ensure a long term and steady supply of iron ore material. According to the market announcement made by Rio Tinto Limited on 22 December 2006, the industry benchmark pricing of iron ore in the year commencing April 2007 is expected to increase by 9.5% when compared with that of 2006 and is an increase for the fourth consecutive year. The Company anticipates that any sustained strong GDP growth as well as export growth in China in the coming years will likely result in continued strong demand of iron ore material from China. Therefore, the Directors are of an optimistic view on both the price and the demand of iron ore material in the future. Furthermore, the Acquisition is anticipated to enable the Company to generate income and cash flow from the Company’s investment and trading activities in the resource sector. As disclosed in the circular of the Company dated 12 December 2006, the Company is looking for business and investment opportunities that complement, enhance and reinforce its principal business. The Directors are of the view that the Acquisition fits in with the Company’s business strategy, corporate objectives and principal business activities.

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The Vendor has obtained a valuation report dated 30 September 2006 in which the Iron Ore Mine was valued at approximately RMB2,800,000,000 on the basis that, amongst other things, a further estimated capital investment of approximately RMB823,000,000 to be required for future exploration and exploitation of the iron ore by open pit mining from the Iron Ore Mine. According to the valuation report, the mining capacity of the mine will be 5 million tones annually and the estimated resources is approximately 142,000,000 tonnes under the open pit mining and is sufficient to support mining for 29 years. This information is not warranted by the Vendor in the Acquisition Agreement and confirmation of this will be part of the due diligence work to be carried out by the Company. In light of this, the Board is of the view that it is justified and reasonable to proceed with the Acquisition. Notwithstanding this valuation report, the Company will engage an independent technical adviser to issue a technical report in respect of the Iron Ore Mine in accordance with Chapter 18 of the Listing Rules.

Having regard to the nature of and the benefits resulting from the Acquisition, the Directors (including the independent non-executive Directors) are of the view that the Acquisition is in the best interest of the Group and the Shareholders as a whole and the terms and conditions of the Acquisition are on normal commercial terms, which are fair and reasonable. Management has a representative, namely Mr. Michael Joseph Bogue, who has experience in the mining business. His experience had been announced by the Company on 25th September, 2006. In addition, the Company is in preliminary discussions with Shougang Holding (Hong Kong) Limited, being a substantial shareholder of the Company, for the provision of technical support to the Group in relation to the iron ore mining business although no concrete terms have yet been reached. In the event that an agreement is entered into with Shougang Holding (Hong Kong) Limited, this may be a connected transaction for the Company. It remains the Company’s intention to identify and invite more candidates with relevant experiences to join the senior management team of the Company.

LISTING RULES IMPLICATIONS

The Acquisition constitutes a very substantial acquisition of the Company under the Listing Rules and is therefore subject to the approval of the Shareholders at the SGM. The Acquisition will be subject to the requirements of Chapter 18 of the Listing Rules. As the Vendor and the Guarantor are Independent Third Parties and have no interest in the Shares which is different from the other Shareholders, no Shareholder is required to abstain from voting in respect of the proposed ordinary resolution to approve the Acquisition at the SGM.

A circular containing, among other things, the details of the Acquisition Agreement, the relevant financial information of China Mineral and a notice of the SGM will be despatched to the Shareholders as soon as practicable.

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GENERAL

Completion of the Acquisition Agreement is subject to the satisfaction of the conditions precedent therein.

As the Acquisition Agreement may or may not complete, Shareholders and potential investors are advised to exercise caution when dealing in the Shares of the Company.

SUSPENSION AND RESUMPTION OF TRADING

Trading in the Shares of the Stock Exchange was suspended at the request of the Company with effect from 9:30 am on 21st February, 2007 pending the release of this announcement. The Company has applied for a resumption of trading in its Shares with effect from 9:30 a.m. on 7th March, 2007.

DEFINITIONS

“Acquisition”	the acquisition pursuant to the Acquisition Agreement;
“Acquisition Agreement”	the conditional share sale and purchase agreement dated 16th
	February, 2007 entered into between the Company as the
	purchaser, the Vendor and the Guarantor relating to the sale
	and purchase of the Sale Shares;
“Board”	the board of directors of the Company;
“China Mineral”	China Mineral Resource Limited, a limited liability company
	incorporated in Hong Kong on 13th August, 2005 with its
	sole asset being 100% beneficial equity interest in Mongolia
	Co which has the right to exploit and explore the Iron Ore
	Mine;
“Company”	APAC Resources Limited, a company incorporated in
	Bermuda with limited liability, the Shares of which are listed
	on the Stock Exchange;
“Completion”	completion of the Acquisition Agreement;
“Completion Date”	on or before 31st December, 2007, or such other date as the
	parties to the Acquisition Agreement may agree in writing;
“Consideration”	HK$450,000,000;
“Consideration Shares”	500,000,000 Shares in the authorized share capital of the
	Company valued at HK$0.60 per Share, being a premium of
	approximately 11.11% to the closing price of the Shares on
	the Stock Exchange on the last trading day prior to the date
	of the Acquisition Agreement, i.e. 8th February 2007;
“Directors”	directors of the Company;

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• “Enlarged Capital After 3,818,004,000 Shares in issue upon Completion; Completion”

“Existing Capital” 3,318,004,000 Shares in issue as at the date of this announcement;

• “Exploration Licence”

• the licence issued by Mines Resources & Oil Management Bureau of Mongolia ( ) in respect of the Iron Ore Mine;

• “Exploitation Licence”

• means the licence dated 2nd December, 2005 issued by Mines Resources & Oil Management Bureau of Mongolia ( ) in respect of the Iron Ore Mine;

• “Group”

the Company and its subsidiaries;

• “Guarantor” Mung Kin Keung, an Independent Third Party;

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong;

• “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China;

• “Independent Third Party”

• person who himself is, and (in the case of corporate entity) its ultimate beneficial owners are, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, third parties who are not connected persons of the Company and are independent of and not acting in concert with the Company and its subsidiaries, their directors, chief executives and substantial shareholders or their respective associates (as that term is defined in the Listing Rules);

• “Iron Ore Mine” Bayang-Keer Iron Ore, an iron ore mine located in the north of Mongloia which is 90 kilometers north east of Selenga River Site, 120 kilometers of Darhan Railway Station, Mongolia;

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;

• “Mongolia Co” means “ARIT” Co., Ltd., a company incorporated in Mongolia;

• “Sale Shares” 10,000 shares in China Mineral, representing the entire issued share capital of China Mineral;

• “Share(s)” ordinary shares of HK$0.10 each in the share capital of the Company;

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“Shareholder(s)” holder(s) of the Shares; “SGM” the special general meeting of the Company to be convened and held for the Shareholders to consider and if thought fit, approve the Acquisition; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “Vendor” Asia Pacific Resources Group Company Limited, a company incorporated in the British Virgin Islands and is wholly owned by the Guarantor; “%” per cent. By Order of the Board APAC Resources Limited Yue Jialin Chairman

Hong Kong, 6th March, 2007

As at the date of this announcement, the board of Directors comprises Mr. Yue Jialin (Chairman), Mr. Lau Yau Cheung (Chief Executive Officer), Mr. Michael Joseph Bogue, being the executive Directors; and Mr. Wong Wing Kuen, Albert, Mr. Tsui Robert Che Kwong and Mr. Yang Weiming being the independent non-executive Directors.

* For identification purpose only

Please also refer to the published version of this announcement in The Standard.

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